Cash flow forecast for small businesses – how to get control over liquidity

There are companies that go bankrupt even though they're profitable.

It sounds paradoxical, but it happens more often than most people think. According to UC, thousands of Swedish companies become insolvent every year — not because they lack customers or revenue, but because the money runs out at the wrong time.

The cause is almost always the same: insufficient cash flow control.

A cash flow forecast is the tool that prevents this. Yet the majority of Swedish small businesses don't have a working one. In this guide we go through what a cash flow forecast is, why it's business-critical, and how to build one that actually works in practice.

What is a cash flow forecast?

A cash flow forecast is a forward-looking calculation of how much money is expected to come into and go out of your company over a given period — usually 30, 60 or 90 days.

Unlike an income statement, which shows whether you're profitable over time, the cash flow forecast shows whether you have money in the account right now and in the near term.

The difference is crucial:

• Perspective — The income statement is backward-looking, the cash flow forecast is forward-looking.
• Measures — The income statement measures profitability, the cash flow forecast measures liquidity.
• The question it answers — Income statement: “Are we making money?” Cash flow forecast: “Do we have money?”
• Time horizon — Income statement quarterly or annually. Cash flow forecast weekly or monthly.
• Warning of problems — The income statement warns after the fact. The cash flow forecast warns in advance.

You can have an income statement showing profit and still be left with no money in the account. This happens, for example, when:

• Customers pay late (30–90 day payment terms)
• You have large outgoing payments such as salaries, VAT or tax concentrated at a few points in time
• You invest in growth (inventory, hiring, marketing) before revenue has time to catch up

Why does your company in particular need a cash flow forecast?

You avoid liquidity crises before they arise

The biggest benefit of a cash flow forecast is that it gives you time to act. If you see that the account will be empty in six weeks, you have six weeks to solve it — by postponing an investment, negotiating payment terms or securing a credit facility.

Without the forecast you discover the problem the day the invoice is due.

You make better decisions — faster

“Can we afford to hire now?” “Can we invest in new equipment?” “Should we take on this project?”

Every such decision requires the same basis: do you know what cash flow looks like over the coming months? With a cash flow forecast you can answer these questions with figures instead of gut feeling.

You strengthen your position with banks and investors

If you need financing — whether it's a bank loan, an overdraft facility or a funding round — the cash flow forecast is one of the first documents requested. It shows that you understand your company's financial dynamics and that you plan proactively.

A business owner who can show a clear liquidity forecast signals control. That builds trust.

You spot patterns you'd otherwise miss

Cash flow in a typical Swedish SME rarely follows an even curve. There are peaks and troughs — often linked to:

• VAT periods (quarterly or monthly depending on revenue)
• Salary and tax periods
• Seasonal variations in sales
• Customers' payment behavior

Without a forecast you only see the current account balance. With a forecast you see the patterns — and can plan around them.

How to build a cash flow forecast in 5 steps

Step 1: Map all expected incoming payments

Start with the revenue side. List all expected incoming payments over the next 90 days:

• Invoiced revenue — what have you invoiced and when is payment expected? Count on the actual payment pattern, not the due date. If your average customer pays 5 days after the due date, adjust the forecast accordingly.
• Recurring revenue — subscriptions, contracts with fixed monthly amounts, retainers.
• Expected new sales — be conservative. Don't count on deals that aren't signed.
• Other incoming payments — tax refunds, grants, dividends from subsidiaries.

Common mistake: Counting on revenue that is “almost certain” but not yet confirmed. In a cash flow forecast there is only money that is invoiced or contracted. Everything else belongs in an optimistic scenario — not the base plan.

Step 2: List all expected outgoing payments

Now the other side. Go through all costs and outgoing payments:

Fixed costs (the same every month):

• Salaries and employer social security contributions
• Rent and premises costs
• Insurance
• Software licenses and IT costs
• Loans and leasing agreements

Variable costs (vary with activity):

• Purchases of goods and materials
• Freelancers and subcontractors
• Marketing costs
• Travel costs

Periodic costs (rare but large):

• VAT (monthly or quarterly, depending on revenue)
• Preliminary tax (monthly)
• Accrued holiday pay liability
• Annual fees and licenses
• Year-end accounting costs

Common mistake: Forgetting the periodic costs. The VAT payment in April, the holiday pay disbursements in June and the annual insurance premium in January create big troughs in cash flow if they aren't planned in.

Step 3: Calculate net cash flow per week or month

For each period (week or month, depending on how detailed you want to be):

Net cash flow = Incoming payments − Outgoing payments

Then accumulate continuously:

Closing balance = Opening balance + Net cash flow

A simplified monthly view can look like this:

• April: opening SEK 320,000 · in 480,000 · out 410,000 · net +70,000 → closing SEK 390,000.
• May: opening SEK 390,000 · in 440,000 · out 520,000 · net −80,000 → closing SEK 310,000.
• June: opening SEK 310,000 · in 390,000 · out 560,000 · net −170,000 → closing SEK 140,000.
• July: opening SEK 140,000 · in 350,000 · out 380,000 · net −30,000 → closing SEK 110,000.

In the example above we see that cash flow gradually weakens over the summer — a common pattern for service companies. Without the forecast, the liquidity pressure in July would have come as a surprise. With the forecast you can act as early as April.

Step 4: Identify critical periods

Look at the forecast and mark periods where:

• The closing balance approaches zero — or falls below the level you need to feel secure (a good rule of thumb: at least 2 months of fixed costs in reserve)
• Net cash flow is negative several months in a row — that's a pattern that requires action, not just luck
• Large outgoing payments coincide — VAT, salaries and a quarterly insurance premium in the same week can create a temporary crisis even in an otherwise healthy company

Step 5: Create action plans

A cash flow forecast isn't just an analysis tool — it's a decision tool. When you identify a critical period, plan concrete actions:

• Customers pay too late — Introduce shorter payment terms, send reminders proactively, offer a discount for fast payment.
• Large payments bunched together — Negotiate payment plans, spread costs over several months.
• Seasonal dip in revenue — Build up a cash reserve during strong months, plan marketing efforts ahead of the weak period.
• Fast growth strains the cash — Secure a credit facility in advance, adapt the investment pace to cash flow.

5 common mistakes that ruin the cash flow forecast

1. You update it too rarely

A forecast made in January and never updated is useless in March. The cash flow forecast must be a living document updated at least every two weeks — preferably every week.

2. You're too optimistic about incoming payments

It's human to count on the best-case scenario. But in cash flow planning that's dangerous. Base it on the probable scenario and have a pessimistic scenario ready.

3. You forget the VAT

VAT is the most common cause of unexpected cash flow troughs in Swedish small businesses. If you report VAT quarterly, the payment can be hundreds of thousands of SEK — and if it's not in the forecast it creates a crisis out of nothing.

4. You confuse revenue and incoming payments

The fact that you've invoiced SEK 500,000 in March doesn't mean you have SEK 500,000 available. If the payment term is 30 days and the customer pays 10 days late, you have the money in May. Your forecast must be based on when the money actually arrives in the account, not when the invoice is sent.

5. You make it too detailed

A forecast so complex that no one bothers to update it is worse than a simple forecast that's actually used. Start simple — you can always refine it later.

When Excel is no longer enough

Many business owners start with a spreadsheet. It works — for a while. But Excel-based cash flow forecasts have clear limitations:

• Manual entry — every figure has to be updated by hand, which takes time and increases the risk of errors
• No connection to actual transactions — the forecast lives in its own world, separate from the bookkeeping
• No automatic updating — invoices that get paid, costs that arise or contracts that change aren't updated automatically
• Hard to share — if more people on the team need to see the forecast, version control quickly becomes a problem

Modern finance services solve this by connecting the cash flow forecast directly to the accounting system. Incoming and outgoing payments are updated in real time, invoices that fall due appear automatically, and the forecast is adjusted continuously without manual work.

The result is a forecast that's always accurate — not one that was accurate the day it was created.

A cash flow forecast in practice: an example

Let's take a concrete scenario.

Company: A consulting firm in Gothenburg with 8 employees and SEK 6 million in annual revenue.

The situation: The company has had a strong spring with several new customers. The owner is considering hiring another consultant after the summer.

Without a cash flow forecast: The owner looks at the account balance (SEK 580,000), sees that it looks good, and decides to go ahead with the recruitment.

With a cash flow forecast: The forecast shows that:

• Three large customers have 45-day payment terms, which creates a delay in incoming payments
• The VAT payment in August (Q2 VAT) is SEK 190,000
• The holiday pay disbursements in June–July take a further SEK 240,000
• Revenue decreases during the holiday period while fixed costs remain

The forecast shows that the closing balance at the end of August lands at SEK 85,000 — far below the level required to safely hire in September.

Decision with the forecast: Postpone the recruitment to October. Or: renegotiate the payment terms with the three large customers. Or: secure an overdraft facility as a buffer.

The same decision. Completely different outcomes depending on whether you have the basis or not.

Checklist: Get started with your cash flow forecast

• Gather all invoiced but unpaid customer receivables and their expected payment dates
• List all fixed costs per month (salaries, rent, licenses, loans)
• Map periodic costs over the next 12 months (VAT, tax, annual fees)
• Calculate the average payment time from customers (not terms — actual behavior)
• Build your first 90-day forecast with opening balance, incoming and outgoing payments per month
• Identify periods with negative net cash flow and create action plans
• Set a routine: update the forecast every week or every two weeks
• Consider automating by connecting the forecast to your accounting system

Summary

A cash flow forecast isn't an advanced finance tool for large corporations. It's a fundamental control tool for every company that wants to grow without risking running out of money.

Most liquidity crises in Swedish small businesses could have been prevented with a simple forward-looking forecast and 15 minutes of work per week.

Start simple. Update regularly. And above all: use the forecast as a basis for decisions, not just as a report to look at.

Your company's finances should give you control — not sleepless nights.

Common questions about cash flow forecasts

How far ahead should a cash flow forecast extend?

For most small businesses, 90 days (3 months) is a good horizon. It provides enough foresight to act on problems without the forecast becoming too uncertain. Companies with longer sales cycles or large seasonal variations may need a 6–12 month forecast, but with less detail the further out in time.

What's the difference between a cash flow forecast and a liquidity budget?

A liquidity budget is the planned version — what you expect cash flow to be based on budget and plans. A cash flow forecast is updated continuously with actual figures and adjusted assumptions. In practice you want both: the budget as the target picture and the forecast as the reality check.

How often should I update the cash flow forecast?

At least every two weeks, preferably every week. If your company moves fast — many invoices, rapid changes, tight margins — it may be justified to update daily. With an automated solution connected to the accounting system the forecast updates in real time.

Can I make a cash flow forecast in Excel?

Yes, absolutely — and it's a good place to start. But Excel requires manual updating, has no connection to your actual transactions and makes it hard to keep the forecast current. Most companies that start in Excel eventually move to an automated solution.

What do I do if the cash flow forecast shows that the money isn't enough?

That's exactly the purpose of the forecast — to give you time to act. Depending on the situation you can: renegotiate payment terms with customers, postpone planned investments, apply for an overdraft facility, negotiate installment payments with suppliers, or intensify sales efforts. The earlier you see the problem, the more options you have.

This article is written by the MinCFO editorial team. The content is general and does not constitute financial advice. Contact a financial advisor for guidance based on your specific situation.

Sources

• UC – bankruptcy statistics for Swedish companies
• The Swedish Tax Agency – VAT reporting and preliminary tax
• Tillväxtverket – financial planning for small companies
• The Riksbank – corporate financing and liquidity
• Bolagsverket – annual reports and year-end accounts